PepsiCo's workplace wellness program fails the bottom line: study

NEW YORK (Reuters) - A long-running and well-respected workplace wellness program at PepsiCo that encourages employees to adopt healthier habits has not reduced healthcare costs, according to the most comprehensive evaluation of a such a program ever published.

Bottles of Pepsi cola are seen in a display at PepsiCo's 2010 Investor Meeting event in New York, March 22, 2010. REUTERS/Mike Segar

Released on Monday in the journal Health Affairs and based on data for thousands of PepsiCo employees over seven years, the findings “cast doubt on the widely held belief” that workplace wellness programs save employers significantly more than they cost, conclude Soeren Mattke of the RAND Corporation and his co-authors. “Blanket claims of ‘wellness saves money’ are not warranted.”

Workplace wellness programs, a $6 billion-a-year industry, are a favorite of the business community because they promise to improve productivity, cut absenteeism and reduce medical costs by averting expensive illnesses. They aim, for instance, to help employees quit smoking, maintain a healthy weight and have regular screenings for elevated cholesterol, high blood pressure, cancer and other conditions, all of which are supposed to reduce healthcare spending.

Half of U.S. employers with at least 50 workers offered a wellness program in 2012, as did more than 90 percent of those with 50,000-plus workers, according to a 2013 RAND report. PepsiCo’s was introduced in 2003.

The programs are also a pillar of the Affordable Care Act (ACA), President Barack Obama’s healthcare reform law. The ACA allows employers to reward workers who participate in wellness programs, and penalize those who refuse, with discounts or increases of as much as 30 percent of their insurance costs. That can be thousands of dollars per year.

Some workers have objected to the programs because of the penalties. Others say workplace wellness efforts invade their privacy and promote poor medicine.

Last year, for instance, faculty members at Pennsylvania State University rebelled against a workplace wellness program whose “health risk assessment” asked, among other questions, whether male employees examined their testicles every month and whether women employees intended to become pregnant. They also protested its requirement that even healthy young adults receive frequent cholesterol and other screenings, which physicians recommend against, and the steep penalties for opting out: $1,200 a year.

“You’re making employees do something that invades their privacy and that goes against medical advice, and now we’re seeing (in the PepsiCo study) that it doesn’t even save the employer money,” said Al Lewis, founder and president of the Disease Management Purchasing Consortium International, which helps self-insured employers and state programs reduce healthcare costs.

PepsiCo did not respond to requests for comment on the study. Megan Broderick, senior manager of the company’s health and welfare benefits and a co-author of the Health Affairs paper, said she could not speak to a reporter without permission.

The vendor that sold PepsiCo the program, the SHPS division of ADP, also declined to comment, citing “client confidentiality,” said ADP spokesman Dick Wolfe.

Maria Ghazal, a vice president of the Business Roundtable, an association of chief executives of large U.S. corporations, said its members are “as enthusiastic as they have ever been about these (workplace wellness) programs,” adopting them not only to control healthcare costs but also to boost employee morale and improve recruitment.

“Wellness is an area where you can distinguish yourself,” she said. “Employers feel they help attract and retain” valued workers.

‘HEALTHY LIVING’

For their study, RAND’s Mattke and his colleagues - including two PepsiCo executives - examined PepsiCo’s “Healthy Living” program, which has two components.

One, called disease management, helps people with any of 10 chronic illnesses, among them asthma, diabetes and hypertension. They receive regular phone conversations with a nurse about managing the condition.

Disease management produced healthcare savings of $136 per member per month, largely because of a 29 percent reduction in hospital admissions, the researchers found. When hypertension is well controlled, for instance, people are less likely to land in the hospital with a stroke. When asthmatics take their medication, they don’t wind up in the ER unable to breathe.

The “lifestyle management component” is what most people think of as a workplace wellness program. It includes a health risk assessment in which workers answer questions about such behavior as eating and exercise habits; smoking cessation programs; and educational materials and telephone sessions with a “wellness coach” to help them lose weight, eat healthy, get fit, manage stress or stop smoking.

PepsiCo employees who participated in these lifestyle programs reported a small reduction in absenteeism, but there was no significant effect on healthcare costs. (The study uses costs as a proxy for health, assuming that if people get sick they seek care. But it did not explicitly assess the programs’ effect on participants’ health.)

“Participation in lifestyle management interventions,” conclude the PepsiCo researchers, “... has no statistically significant effect on healthcare costs,” and employers considering adopting such a program “should proceed with caution.”

The PepsiCo study is not the first to find that workplace wellness programs fall short of their promise. Last year, Mattke was the lead author of a RAND report that found that healthcare costs of workers who participated in such a program averaged $2.38 less per month than non-participants in the first year of the program and $3.46 less in the fifth year. Neither difference was statistically significant.

Researchers who are skeptical of wellness programs’ benefits are concerned that the ACA - “Obamacare” - allows employers to offer substantial financial rewards and penalties tied to something ineffective.

“The ACA took a bad idea, workplace wellness programs, and turbocharged it by allowing employers to penalize workers,” said Lewis, co-author of a new e-book titled “Surviving Workplace Wellness.”